NZ dollar treads water as markets mull greenback strength

File photo / NZ Herald

The New Zealand dollar is in a period of consolidation as markets muse over the rapid gains in the greenback over the past three months.

The kiwi traded at 77.89 US cents at 5pm in Wellington from 78.31 cents at 8am and 77.96 cents yesterday. The trade-weighted index slipped to 75.95 from 76.17 yesterday.

Support for the greenback has been waxing and waning in recent sessions while traders second-guess the Fed's intentions as the US economy gathers steam. The US dollar index, a measure against a basket of currencies, has gained as much as 8.7 percent since the end of June, with the prospect of higher US interest rates a key driver in demand.

The Fed is scheduled to release minutes to the Federal Open Market Committee's September meeting on Wednesday in Washington, and several Fed officials will be delivering speeches in coming days.

"It's just a question of how much people want to take the US dollar reversal," said Sam Tuck, senior foreign exchange strategist at ANZ Bank New Zealand, in Auckland. "The fundamental data still supports the US dollar on trend to be stronger."

The local currency declined to 88.80 Australian cents from 89.12 cents yesterday after the Bureau of Statistics said it would revise employment reports for the past two months, which were unusually volatile.

Reserve Bank of Australia governor Glenn Stevens yesterday said labour data had been volatile recently, and that tepid wage growth would remain a constraint on inflation.

The kiwi fell to 84.40 yen from 85.05 yen yesterday after the Bank of Japan kept its quantitative easing programme intact as it looks to stoke inflation to an annual 2 percent rate.

The local currency traded at 61.64 euro cents from 61.78 cents yesterday, and was little changed at 48.49 British pence from 48.59 pence yesterday.